IF AUGUST tends to be the season for financial markets to get jittery about a crash, then this month should see dealers really sweating.

It was a year ago next week that a few words from thefinancier George Soros triggered a crisis in Russia that started a chain of events that almost led to a global recession. And 12 months before that, the Asian crisis, sparked by the devaluation of the Thai baht, was well under way.

There is certainly a febrile atmosphere. The coincidence of these anniversaries, combined with the giddy heights achieved by stocks on Wall Street, has led to forecasts of another financial crisis. Even within the past few weeks, two relatively minor events have sent a tremor through the financial markets.

The first was a crowd-pleasing comment by a Brazilian presidential candidate hinting at a default on debts to the International Monetary Fund (IMF), which caused panic in the Latin American stock markets. More recently, the woes of the ailing Korean car maker Daewoo led to fears of another Asian crisis, wiping almost 4 per cent off Seoul's stock market. But more of this later.

The three-trillion dollar question is where the next shock will come from. The first step, perhaps, is to look at where the last shock emanated from - Russia.

It is worth recalling what happened a year ago. On 13 August, Mr Soros called on Russia to devalue the rouble by up to 25 per cent and peg it to the euro or the dollar. With insufficient revenues to prop up the rouble - and a powerful speculator on its back - Russia was faced with a choice of printing more money and risking hyperinflation or defaulting on its debt. On 17 August, it pressed the default button. The rouble was massively devalued, the Russian stock market imploded and swathes of the domestic banking system faced bankruptcy.

Suddenly US hedge funds were exposed to default on billions of dollars of debt and the financial markets threatened to grind to a halt.

Since then, Russia has undoubtedly made substantial achievements. The devaluation has stimulated domestic demand. Goldman Sachs, which is bullish on Russia, forecasts 3.1 per cent GDP growth in 2000 compared with minus 4.3 per cent last year.

A consultant economist, Al Breach, said: "Right now the prospects are good. Indeed, they have never looked better this decade. Russia's second attempt at capitalism is only just beginning." But in a move that highlighted the political threats to the recovery, the IMF threatened to cut off funding unless Moscow carried out reforms. Shares plunged 7 per cent in reaction.

Politics plays a huge part in the Russian economy - Boris Yeltsin has a tendency to sack the government, and his health continues to be in doubt.

Gintaras Shlyzhius, of Raiffeisen Bank, said recovery depended on reforms being implemented. "Both the IMF and the government acknowledge serious reforms are unlikely in the light of the coming elections," he said. "Most problems Russia had before the crisis remain and most are structural problems."

The country has tax revenue shortfalls and needs to improve corporate governance and shake up inefficient Soviet-style management.

In Asia, the pattern is similar - analysts are bullish but sceptics warn of political expediencies that could slow up the reform process.

Shares and currencies in the five main countries - Indonesia, Malaysia, Korea, Philippines and Thailand - have rebounded strongly. Analysts are urging clients to invest in the recovery, pencilling in GDP growth of 5 per cent next year.

But Joseph Stiglitz, the World Bank's chief economist, said most of the countries were nowhere near recovery in terms of output, employment and real wages. "The fact is, the recovery is nowhere along so far that one can be complacent," he said.

The need for reform was highlighted by the panic caused by Daewoo. With $50bn of debts it presents a serious threat to the banking system.

It makes up 5 per cent of Korean GDP but is not the largest such institution. Samsung has 80 operating subsidiaries and Hyundai 39.

But perhaps the greatest threat comes from China which, according to Russell Jones of Lehman Brothers, is "deteriorating on all fronts - cyclically and structurally".

The spectre of a devaluation of the renminbi to boost a sagging economy has depressed sentiment in the rest of Asia.

"Memories of the Asian crisis are still vivid and it is widely feared that a devaluation will trigger a series of competitive devaluations and contagion," said William Brown of JP Morgan.

China accounts for 27 per cent of Hong Kong's exports, 11 per cent of Korea's and 10 per cent of Singapore's.

A further jolt came from Standard & Poor, which cut the credit rating of the Bank of China and four other major banks to junk and cut the sovereign credit rating because of its slowing economy.

South Africa, once seen as a problem economy, is forecast for stable inflation, a steady exchange rate and lower interest rates. A consumption- led recovery is in prospect. The threat again is political. While the impact of the fall in the price of gold on the mining industry has received huge publicity in the UK, the wider situation has been less well reported.

Formal employment fell 4 per cent last year, a figure which will be surpassed this year. Unemployment is running at 33 per cent. The country faces up to 150,000 job losses because of the slump while gold could account for another 80,000. Meanwhile, a million civil servants are poised to stage a mass strike that would threaten the stability of the new government.

Many investors' concerns have focused on Latin America where political worries hang over the Argentine, Brazilian and Mexican economies.

The principal concern in Mexico remains the election next year, given the currency crises that have accompanied every change in president since 1977. Electioneering also has the power to destabilise Brazil. The markets have already collapsed once this year, in January.

Alessandra Alecci, at IDEAglobal.com, said Congress will this month debate the pro-market reforms of the President, Fernando Cardoso.

"Reforms are needed to speed recovery in the markets. Any delay could send them tumbling," she said.

But the greatest threat comes from a crash in the United States. Economists are now pencilling in a Fed rate rise sooner, rather than later.

A tightening of monetary policy would increase borrowing costs in Latin America, cutting into corporate profits and government revenues, putting pressure on local currencies. But, of course, a slowdown in the US would have global implications.

The current US expansion is 100 months old - in half a year's time it will be the longest expansion of all-time.

Stephen King, chief global economist at HSBC, who recently produced an in-depth analysis of financial market "bubbles", said a combination of rising interest rates and a falling dollar would end the Wall Street miracle. "This is likely to deliver a slowdown in growth through 2000 and raises the risk of outright recession in 2001," he said.

"The rest of the world will not be immune. Falling US equity process and a weaker dollar will create problems for Japan and Euroland, increasing the dangers of outright global recession."